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Fred Siegel
Indebted and Unrepentant « Back to Story

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Barbara Boxer did have the political scare of her life and fended off a serious challenge from former Hewlett Packard CEO Carly Fiorina. Ma'am Boxer could not run on her own achievements and simply made the race about who was the lesser of two evils. A lesser evil is still an evil.
The fact that someone with no previous political experience like Carly Fiorina was even a serious contender shows that Barbara Boxer is still deeply unpopular in California!

The facts:
-Over 4 million voters chose someone OTHER than Boxer.
-Over 48.3% of voters chose someone OTHER than Boxer.
-Barbara Boxer lost in 38 out of 58 counties.
-In four counties that Boxer did "win", she garnered LESS than 50% of the vote.
They were Lake, Sacramento, San Benito, and Santa Barbara Counties.
- 29 California newspapers chose to endorse Fiorina.
Another 2 including the San Francisco Chronicle did not endorse anyone.
-Overall, 31 newspapers chose NOT to endorse Barbara Boxer.
New York State, which gave 47 electoral votes to Truman in 1948 and 45 to Kennedy in 1960, gave only 31 to Obama in 2008 and will give him only 30 in 2012. After the 2020 census, Florida will likely pass New York in electoral votes. Texas already has.

California has lost millions of productive people over the past decade. However, with its generous welfare and its desire for cheap labor, it has filled much of the vacuum with immigrants, both legal and illegal, so its total population has dropped only slightly. However, the ratio of takers to givers has grown dramatically.

I don't know how anyone can confidently predict anything about the tech industry, certainly not "the Bay area will always be a magnet." And a lot of movies are made in Canada now. There are no universal laws dictating that California and New York will always prosper. Every square inch of Los Angeles is some gang's turf, so I wonder how long that city will "be fine."

I'd be interested to know, Anthony, how you think California will meet its "entitlement" obligations--hundreds of billions of dollars--over the next few years.
It's funny that people claim that citizens are leaving CA and NY... In the case of NYC, the city continues to grow, with long-term growth in jobs like business services, tech, finance, etc. Even media/advertising is rebounding. The areas losing people are the more conservative areas upstate. In addition, the Bay Area will always be a magnet for tech in California while the film / tv industry keeps generating jobs in the LA Area. CA and NY will be fine. The conservative hope of "default" or anything else is unfounded.
Has anybody read "What's the Matter with California"? You know, the book that points out how Californians keep voting against their own economic interests?

Over the next few years, California will face "obligations" that it cannot possibly meet. These obligations ($150,000 pensions for 48-year-old toll collectors) were wholeheartedly supported by the voters. It will be interesting to see the depth of commitment of the Hollywood left when they're the only ones left to soak.
AmericanPatriot, you've already proven that I am right and that you know it as you would hardly see anything threatening in such a proposal unless you were certain the red states would lose under such a proposal.

You do understand the hypocrisy involved in blasting wealth redistribution while showing outrage at the idea of stopping it?

Why would we have to block ports or stop paying our brave servicemen? We'll just stop writing out some checks. If this actually happens I just hope that patriotic Americans will accept the painful changes that some will have to endure and ignore the cries for a return to wealth redistribution and other unconstitutional policies...

May both states crash ignominiously into financial oblivion.

It'd hurt the country in the short run, but I can't think of anything more helpful in the long run.
Raid the bath houses of san francisco,and accquire copius amounts of KY jelly.Inject same into san andreas fault to trigger massive earthquake,dumping the west side of the fault into the pacific.Resulting tsunami will also solve the hawaii problem.
You can add Massachusetts to you list :(
Hey Shapiro;
So you think red states are moochers on the great states of CA and NY? First, it was you idiots that pushed the unconstitutional policies of wealth redistribution. So what are you complaining about? Threatening flyover country is not a good idea. We are the breadbasket of this country not to mention all those southern, redneck hillbillies in the MILITARY that have been protecting your pampered A$$. Have fun with the Muslim terrorists, I hear "Shapiro" is a name they hold in high esteem. If you think you can block the ports, etc. see the above reference to "redneck hillbillies".
Unfortunately, you ommitted the State of Connecticut in your discussion. It too is in the same sitaution as California and New York. While Connecticut's debt may not be as large overall as that of these states, on a per capita basis it is part and parcel of the same problem. And what did it do on election day? It too kept most of the Democratic legislative incumbents and put a Democrat in the governor's chair. While Republicans gained some seats in the legislature they are still on the outside looking in.
"The coastal giants would no doubt respond by threatening defaults, which could affect the credit standing of the entire country..."

...and clobber the public standing of Obama and Democrat pols everywhere.

Obama is in a bind. If he bails out California, Rhode Island, and New York (the CRINYs) he'll energize high temperature opposition to himself and Democrat partisans.

If Obama doesn't pass out cash to the CRINY states,

The correct response from New York, California and other states would be to announce that henceforth they will pay in federal taxes exactly what they receive and not one cent more.

Of course, states like Alaska, North and South Dakota, Mississippi, Montana, New Mexico, Alabama and most of the red states will be hit hard, the above states losing between 35% and more than 50% of their total federal money but perhaps a bailout of some kind might be worked out...

Not surprising that Barbara Boxer was reelected by the same electorate that voted down Prop 19. The body politic in California is composed of statists who have vested interest in the status quo.
California's Democratic win in the legislature and the governor's office is true justice. A Republican House in Washington, propositions that diminish the political role in redistricting, a 2/3 majority to pass a tax increase and a requirement that they deliver a budget on time or forfeit their pay. Only a Democrat can govern in this environment and only Jerry brown should be sentenced to this punishment.

I actually think he'll pull it out and only he will pull it out.
I live in California and I say - let it sink!
the truth is that default is the correct solution. this is true with states, banks, countries...and, yes, people.

most people talk about bankruptcy as a worst than death itself action. is it bad for the person/state/bank/etc? yes. is it bad for the poor sucker that lent these people money...yeah.

but covering over the problem with bailouts is a cure that's 100 times worse than the disease.
No better way than to permanently cripple the public sector unions than to let them default. The states are meant to be experimental labs for the country before stuff is done on a federal level. Lets see which labs work and which don't.
"The coastal giants would no doubt respond by threatening defaults, which could affect the credit standing of the entire country, since many of the bonds are held by foreign investors. ..." making it much harder for the Federal Government to secure debt at non-extortionate interest rates. What part of this picture would a Tea Party activist dislike?
You left out my state of disaster, Illinois, which returned the same Governor and General Assembly majorities who have presided over the current developing catastrophe... with huge backing from AFSCME, AFT, SEIU, arguably the difference in the Governor and many down-ticket races, and not about to brook any financially meaningful changes.

The time is ripening for another civil war.
California will determine the economic future of our nation by what they do in 2011. Will they cut, cap, beg, or default? Whatever they do with their increasing public sector union entitlement debt will be intently watched by other states and creditor nations around the globe. All eyes are on Sacramento.
The economic ignorance of liberals is truly astounding.
You neglect to mention Illinois, which just re-elected Pat Quinn, uber-liberal Democrat. Republican did make some gains, but lost the big race.
The issue on NY and California debt is that its almost all tax exempt. Which means that it is only held by US tax payers, typically in NY and California because the tax exemption is of most use in those two states. The markets already identify NY and California as being high risk credits. We should not immediately assume a default by NY or California will necessarily require a federal bail out. However a bailm out was a given up to Nov. 1.
I live in California (worse luck) and will be very disappointed if the other states bail out Governor Moonbeam and company. California has to grow up sometime. Only tough love will do it.
As a California resident, let me add a couple of points.

1. The major debates in recent California electioneering has been blaming the GOP for "intransigence"; refusing to pass the (perennially late) state budget until at least a COUPLE of GOP legislators could be cajoled or bribed into voting for it. Now with the passage of Prop 25, the Democrats take total ownership of the state budget mess. 2012 should be a revelation.

2. The passage of Prop 20 hands over the task of re-drawing congressional districts to an "independent" commission. With luck, 2012 will bring us some newly-drawn, more competitive districts, and the ghost of Jesse Unruh's "contribution to modern art" will finally be exorcised.
States are laboratories of democracy. When one of them blows up, it's a clear lesson to the rest, no?
We do not need to be bailing California and New York out. They will be unscrupulous in putting the rest of the country at jeopardy. Yes, it will be a disaster if we don't bail them out, but like junkies everywhere, if we do they will use some more, and expect more bail out later. They will suck the rest of us dry.
Well as much as that is an interesting quandary considering defaults, has anyone considered the deal that might go down? Well how about this scenario--

In exchange for the bailout funds, California is declared a territory again.They lose voting representation at both the Senate and Representative level till the debt is repaid. A 5 State auditor panel is placed in charge of CA finances and the State Assembly may not issue any expenditure bills without the panels approval.

Any bailout will have huge strings attached. This is only one of many I could envision.
"The upshot would likely be a high-stakes conflict about free trade, globalization, social class, race, illegal immigration, and public-sector unionism."

I think you can add "secession" to the list of things red state voters will consider if California and New York get a bailout.
The super rich are beneficiaries of taxes raised to pay off tax free government bonds -- owned by the super rich.

This explains why they support massive debt and massive taxation on income produced by labor -- the super rich don't labor, and park their wealth in tax free government instruments .. paid for by working stiffs.
Sadly, both these liberal states will require tough love. And they will suffer for their lack of responsibility when their bills come due, which is now.

Think of it as federalism in action, encouraging states to experiment with ideas. Abandoning those ideas which do not work (CA and NY need to work on this) and adopting those that do.
As a happy occupant of flyover country, I think that NY and CA need to follow their own advice-- they can tax and spend their way to prosperity! These are two states where the distance between the rich and the poor could not be more striking. California needs to tax the bejebuz out of LA and the Bay area (property taxes, sales taxes, user fees, the whole ball of wax), and New York needs to bring the hammer down on the Upper East side and Wall Street.

What's good for the country as a whole, can only be good for the individuals states, no? Am I right, or am I right?
Deck Chairs Meet Titanic -- the State of California post 2010 election.
I truly believe that Mayor Bloomberg has done a good job in keeping NY safe and happy. Fiscally, I don't understand the money spent on "pride" items like Citifield. And, the ridiculous try at hosting the Olympics in NY. I believe that all the money from the Feds for 9/11 went into pet projects, but the schools are worse than ever, the highways are disgraceful and the bridges are disasters waiting to happen.
So, what conflict will there be between the Tea Party and the Republicans? None. Even the good politicians keep their eye on their personal prizes, looked at through the spectrum of their own personal pride.
Bloomberg can be proud of how NY is after 9/11. He shouldn't be proud of how he spent all that money.
Hey, don't forget Connecticut. Just cause we are small doesn't mean we can't mess up as good as the big guys.

Our debt and unfunded pensions are higher on a per capita basis than California and New York. Our answer - elect more democrats. All seven of our representatives to Congress are democrats, and our newly elected democrat governor will be joined in Hartford with a legislature that has a vast democrat majority.

Move out of the way California and New York; Connecticut will be the first one in the soup line.
Scary scenario and pretty much what Texans are hearing about these two outlaws. There's big trouble ahead and I'm not convinced that a political pendulum can resolve it. The fireworks may be as extensive as Mr Siegel suggests.
And, we haven't heard the last of a possible Middle East blowup either. It only helps when one realizes that - this is the way of the world. Always has been. Always will be.
"This sets up what could be an ugly fight in which a Tea Party–inflected national Republican Party, encouraged by its strength in the interior states, forces California and New York—now heavily dependent on federal subsidies—to reduce their spending sharply."

There is a great deal of untruth in that statement, and I can't believe Mr. Siegal does not know what it is.

New York and California are net contributors to the federal government. Public sector employment is a smaller share of the total in NYC and most of California than in the rest of the country.

The ugly fight will occur when people and politicians in NY and California wake up to this and force the rest of the country to reduce its spending. It would be too bad if the federal representatives from NY and CA do not understand how to use the Tea Party to best advantage.

They can start be proposing to eliminate all federal transportation spending, farm subsidies, etc. As for Medicaid, they can propose to reduce the federal matching share in all states to their own levels, and reopen the 1996 welfare reform on the grounds that the Red States broke a deal when the Supreme Court ruled the provision allowing more generous states to limit needy migrants to what their own states would have provided.
As a native Californian and still living here and owning a small business here I actually hope we don't get bailed out and the state goes in the toilet. This is the only way we are going to show the nut job liberal that they are wrong. When it all goes to h... in a hand basket maybe then we'll be able to elect some conservatives that will get us back on the right track.
Very insightful article. I think NY and California are going to lose this imminent civil war ... .
Just read that Prop 25 passed. No more 2/3 majority to pass a budget; simple majority will do. We'll see now whether California is serious about reform, or just seeks to tax its way out of their mess. If they seek the later, expect the exodus of non-poor residents to accelerate.
I applaud Mr. Siegel's vision of the future face off between the urban giants on the coasts and the heartland. It would actually be better for everyone in the long run if CA and NY were denied bail outs, (which might happen with a Republican House)and therefore forced to clean up their own mess. We are on ballot initiative in CA to give the voters the right to approve public employee contracts with built in cost limitations. Perhaps we will get a copy of the draft coming out of the Legislative Council coming out in the next week or so.
Ltpar November 06, 2010 at 9:18 AM
Unless this is a new soul reincarnated into the body of Jerry Brown, we are likely to get more of his past tax and spend government. Since California is on the verge of insolvency it will be interesting to see what happens. My bet is on higher fees, taxes and more goverment intervention in business. This, of course will cause more businesses to flee the State, adding to the crisis. At this juncture, I am considering options to take my money and leave the Peoples Republic of California before it goes belly up.

As beautiful as California is, with a nice climate in most parts of the state, there literally is no hope. The democrats will never go against their major groups so the thought of further cut backs in government is null. If I owned a house, if I owned the building my business was in, I would really consider selling NOW as opposed to later, when the value of my property is likely LESS. This really is sad for people who've worked all their lives and tried to do the right things in life to comprehend, but times in California are going to get worse, much worse.
SeekingRationalThoughts November 06, 2010 at 10:57 AM
By the time these situations blow up, much ofthe economically productive populations will have left NY, Ca., and similar states such as Illinois. The other states will see no advantage in bailing out the spendthrift states and will actually profit as more and more businesses relocate out of California. In fact, they will seek to gain by the spendthrifts' demise. I'm sure that some help will be made available, but not enough to keep the Californians and New Yorkers living comfortably. I particularly like the suggestion above that the Feds buy up the bonds, and take over California oil to pay them off. California's and New Yorks's futures are not bright and they don't need shades.
News flash: The fiscally responsible will not bail out profligate CA and NY. You and your grossly overpaid, under-worked public employee unions are on your own. Since states are barred from seeking bankruptcy protection, it is likely the rest of America will watch these behemoths stripped of their assets, while the remaining producers flee, leaving only the locusts to feed on the paltry remains.

Yep, that's what I think. They shouldn't be bailed out, but they will be. The folks in Washington won't care what the rest of us think about it.
Nobody wants to bail out California and New York but you will just like you bailed out the bankers. Do you think you'll be given a choice? That's why they keep spending, they know they'll be covered in the end.
California and New York are extremely liberal states where the electorate are overwhelmingly
liberal. The only way for the Republicans to
win in these states is for majority of Democrats to vote for them as what happened to the recall of Gray Davis. That said, liberals in California are due for a wake up call when they have to start paying up for all their social programs. Someone has to pay for it and we are all out of other people's money. Just wait and see.
Unless this is a new soul reincarnated into the body of Jerry Brown, we are likely to get more of his past tax and spend government. Since California is on the verge of insolvency it will be interesting to see what happens. My bet is on higher fees, taxes and more goverment intervention in business. This, of course will cause more businesses to flee the State, adding to the crisis. At this juncture, I am considering options to take my money and leave the Peoples Republic of California before it goes belly up.
Tom wrote: "How will the "interior" states be asked to bail out New York and California? Please explain."

C'mon, man. Are you serious? Are you even half-aware of the situations in those states? NY is in a lot of trouble and California is a complete disaster. And all of it is self-imposed. Those people spend money like someone has a gun to their heads forcing them to do it. It's like they think there is no end to it. The citizens refuse to do anything about the situations they are in. Despite the certain collapses facing them they bury their heads in the sand and vote in whomever is promising to burn even more cash in the greatest volumes. Their destruction is certain yet they absolutely refuse to reverse course. If they won't do anything about it obviously they are going to demand to be bailed out by everyone else. And although economically bankrupt they do have huge political clout because of their enormous populations. I very much doubt that when the collapses come (California will be first. It's teetering on the edge and the idiotic voters are doing everything they can to speed up the process.) politicians from other states will have the backbone to deny them. Nope, they'll end up being rewarded for their irresponsible gluttony. The sad thing is that they aren't content to simply bankrupt their own states. They send scores of politicians to Washington demanding that the entire country adopt the same failed tax and spend policies. The juvenile political viewpoints of the so-called "progressives" in those states are cancerous. They are going to do us in with a two-pronged assault: 1)Bleed the rest of the union to save them (Temporarily. They refuse to change so over time they'll have to be bailed out over and over again.) from their disastrous, socialist, Utopian policies and 2) Infest Washington with politicians demanding that the entire country adopt the same insane ideas. Ya' think Pelosi is satisfied with just a bankrupted California? Hell no, she's got greater aspirations.
Maybe we could give California to Mexico?
Would they take it?
It took the author almost to the last words to have the courage to mention immigration in an article on massive deficits.

immigration should benefitn a country, not burden it.
The onlyb people that favor massive immigartion are those that benefir from it and pass the social,economic and environmemtal costs onto the comunities and smear all opponents as racist for wanting less immigration.

We are not a nation of immigrants , we are a nation of citizens that want less governmemt,less spending and less immigration.
When the media starts showing pictures of starving children and sick seniors in New York and California I suggest you recall the $200Million per day BO is spending entertaining his friends in India. I will.
Let each States residents pay for each States dept. They elected their Elected Spenders not anybody else. I for one will NOT pay a dime to either NY or CA in a bailout and I am not alone.
Being a lifelong NYer, I fully agree w/ your analysis. Mayor Bloomberg could have reigned in spending by confronting the unions when he had the political capital over the last 8 years. Instead, he focused on advising people as to what they could eat, drink, and smoke. He's a close 2nd to Dinkins in "terms" of incompetence.

I've worked in Manhattan my entire career and continue to witness the mass exodus of top earners to CT, DE, FL, TX, abroad, etc., where the climates a more business/tax friendly.

I'm truly vexed by the autocratic nature of the Democratic entrenchment and corruption that rules this once great State, while satiating itself parasitically on private business. Read: Sheldon Silver, Shumer, Gillebrand, etal. And we, the supposed highly-educated class, reelected these people.

P.S. NYS unfunded public employee pension liabilities = $55B. Seriously considering relocating to Hong Kong.
@Eric Gersh:

Your statements are comical. People of NY and California pay a lot of net dollars to the federal government simply because they are high-density population centers and because there is a heaping helping of gzillionaires living in those states. The rates individuals pay in those states are the same as everyone else so give the fuzzy math a break. You want to lessen the amount of dollars citizens of NY and California are paying to the federal government? Then send to Washington politicians in favor of lowering federal income taxes as opposed to always sending exactly the opposite like you currently do. It's hysterically ironic that libs in California and NY are always so adamantly in favor of taxing the rich into oblivion when they are harboring the largest percentages of rich people. Then a few of you take the joke even further by visiting pages like this one to complain about it when in fact the whole thing was your idea! People in red states want lower taxes...for everyone. If you don't like paying so much to the federal government then stop sending politicians to Washington begging to pay even more.
The latest Republican wins did not include California. Almost all Democrats got elected on all levels. For a non Hispanic living in California this is very dangerous. The Arizona immigration law is being debated in San Francisco right now and it is barely making the news. We can’t forget this fight. It is critical that more action be taken to protect American citizens. In California, right now there are daily gunfights, gang wars, rapes, accidents etc being committed largely by illegally present Mexicans, When you try to call the ICE hotline to turn in illegal workers a Hispanic sounding recorded voice threatens criminal prosecution to anyone who might file a false report. So, you have to prove a worker is illegal now before you can file a complaint with the US Govt. about suspected illegal workers? The California state Govt. has a bilingual preference on many jobs. It might as well say no whites, blacks, Asians etc. need apply. I talk to white and black people everyday that can’t get a job because every single business that has a Mexican owner or manager hires nothing but Mexicans period. They use bilingual preference as an excuse to discriminate against other races. You can often go into stores or government entities, clinics etc. in all white or all black neighborhoods and see nothing but Hispanics working there. Action must be taken now to take back America for all races. The fact that the Obama administration can let 10 million American workers be unemployed, while letting 11 million people stay illegally, to get Hispanic votes is unacceptable. I am including a couple of links for your reference to prove my case. One is from the Los Angeles times. It is a series of articles about drug wars at our doorstep. The other is the DEA website that shows how many drugs are being funneled up from south of the border. Please Help!

Please, all you folks talking about comming to the Great State of Texas, Please leave your Yankee ways at the door. During hard times up North, we've had waves of them come here and all they did was bitch. They wanted to make Texas like thier state had been! An example is State income tax. It's our money so we spend it. Our State legislature meets every two years and if nothing's broke they don't try to fix it. They mostly fight with the damned Federal Govt. When times improve up North, they all skedaddle and good riddance too. The ones who stay have become like us so, they're welcome.
We have a majority now and they still try and dictate to us! No kiddin' cut them off. They flush thier money and want all of ours. I think that, since voters reject nearly all democrat policies, there's supposed to be gridlock. We say no so they scream like spoiled babies. Let'em scream. If you've borrowed yourself nearly to the poorhouse, it's not a good thing when your credit card is cancelled? One way or another we have to get those two under control. The trick will be controlling the cockroaches when the stampede to infest us.
Swallow the small pill before it becomes a big pill. New York and Cali must die by their swords.

I have been waiting for someone to write this article. I think its spot on. Here in Colorado we have absolutely NO interest in bailing out the snarky myopic liberals of the Northeast and West Coast. Many of the folks here that form the upper tier wage earners escaped those regions long ago and still harbor poor memories of the way things were then; now they are much worse. Pay for Cali and NY - NO WAY! They need to dig themselves out of their own messes. They will need to beg elsewhere, they will find no mercy here.
texas here we come.
We will not bail them out.
FormerSoCal ,

The lights will have been shut off long before that last family leaves...
@ Eric Gersh

First, I do not consider California or New York "worthless succubi"; I love them both, even though I could not afford to live in other one in a sane manner, given the out-of-control state governments there.
2nd, your secession vision assumes that the wealthy people that live in California would stay there upon secession, which they probably wouldn't, given that California would no longer live under the laws and protection of the United States that made their wealth accumulation possible.
3rd, also, the "net transfers" is largely an illusion provoked by the disproportionate % of wealthy people that live in California and New York and pay federal taxes at the top federal brackets. As I mentioned before, these wealthy individuals would pay these federal taxes even if they moved to other states (more or less, depending upon higher or lower tax deductions due to differing state rates), so California and New York have little to do with these federal tax receipts. In fact, these wealthy individuals earn dividends and interest from corporations in other states, from the federal government, and even from other countries, so to count their individual federal tax contributions as California's or New York's (or any other state's) is quite misleading.
Finally, the whole "net transfers" measure is in fact very useless. For instance, both California and New York municipalities issue a substantial amount in municipal bonds at a discounted interest rate, thanks to federal exclusion of income tax on municipal bond interest. This subsidy is not counted in the "net tranfers" measure. This is but one of many material items ignored by that measure.
OK, if you are all so convinced of CA and NY being worthless succubi, just kick us out of the union. We'll keep our tax monies formerly transferred to all of you and form our own, fiscally solvent union. See how well you all do without 21% of the current national GDP and almost $1 trillion in net transfers. You know what, throw in NJ and IL while you're at it. Each of them also sent almost a half billion $ more than it received over the past 20 years. Then you can have your conservative majority and leave us to live in our pathetic heathen paradise. Would be a fun experiment. I'm so sick and tired of hearing this self righteous clap trap about how frugal, upstanding and forthright and truly American all the red states are while we profligate socialist coastal types just syphon up all your hard earned money. Give it a rest. Especially you, "Econ Guy without facts.
I spent 4 years in San Diego after my company transferred me there. It was pretty, but the state drove my company out forcing me to fly from SAN to work in other states. So many Californians were so superficial and ungrounded, I can see why they believe politicians lies over and over. Between work and the state's culture of hostility to families with children, we left for TX and haven't looked back. The last middle class family that leaves CA, please turn out the lights.
@Nyarlathotep said:
(Also, as Alex mentioned, we (California) pay out more than we take in. So we are currently funding your state's welfare. You're welcome.)
This is an oft-repeated myth that needs to be cleared up.
1st, the federal government gets very little money directly from the state governments; the high level of income "from" California and NY simply reflects the high percentage of absurdly wealthy people that live there, and pay at the highest federal progressive rates. Most would pay these federal taxes even if they moved out of those states, so the federal tax receipts are not state-specific. By contrast, a large amount of the federal money going to California and New York goes to the state government to divy up to constituents, and these expenditures are largely state-specific. The total amount of money California and New York pull from the federal government far exceeds that of the other states.
2nd, many red states appear to be net recipients of federal largesse simply because the US maintains military installations and other federal operations that are not state-specific; these expenditures count as federal expenditures to the states, even though these are really federal operations conducted within those states.
All in all, the ratio of federal expenditures to federal tax revenues is a largely useless measure, except to mislead people into thinking that states such as California and New York "subsidize" other states.
OK, first off. . . what "solvent" states in the interior. . . particularly if you take away the subvention provided by the "indebted" states of California and New York. How about, we give California and New York even half of the net transfers they've both made to the rest of the country over the past 20 years? That would put both states well into the black for the foreseeable future.

The problem isn't New Yorker or Californian profligacy, it's the rest of the country soaking those two, and many other "liberal" centers of wealth to prop up their red state tax systems. So, come off your high horse and prove your commitment to fair taxation. Time for a big tax rebate to NY and CA!
Dick-Obama CANNOT bail out any State without the House. Obama has no rights to send money anywhere. The Executive Branch cannot stipulate spending-only the Congress, although I am sure Obama THINKS he can do so. And folks that is why California and NY are in deep doo doo.........
Not one dime until each State balances its budget. If not, go BK. Decertify the Unions and bring them to heel. We, the People are through with California's and New York's excess....We can survive their defaults. The Unions cannot-nor can the Democrats who run them. The piggy bank was closed on Tuesday.
Can't wait for the implosion in California. The strangle hold that the Unions have on the legislature is simply and all Democratic office holders is beyond belief.
Bankruptcy would at least allow the State to renegotiate the public employees retirement packages, which will bankrupt California eventually.
New York and California should default. Other solvent states will still be able to manage their debt service without having to subsidize the unsustainable policies of the left coasts. With all the chatter about red states leeching off the blue states I'd like to see a "earned here stays here" policy of wealth consolidation. Abolish the 16th Amendment, and let states decide their LOCAL tax policies and prohibit sending more money to a state than it sends to the federal government.
@old yeller:

All states are net contributors to the federal treasury, lol. That's why there is a federal government! If the federal government were not taking in tax dollars from people in the states it would cease to exist. But you played your hand pretty well by expressing what seemed to be a wish that they get to keep that money. What money don't you want in NY and California? Perhaps all of us should simply cut out the middleman and send our paychecks directly to those states so they can set it on fire and and sing about how intellectually superior they are as they roast marshmallows over the blaze. It is ironic beyond measure that the hotspots for elitism in this country just happens to be some of the most bankrupt areas in it. But it isn't good enough for y'all that you're running yourselves broke. You send politicians to Washington to demand that all of us do the same. If we're too stupid to see sanity in tax and spend on a state level then you'll simply impose it on us at the federal level. Sickening.
The people in those 2 states have irritated me for quite a while. They are like separate nations comprised of gluttonous and irresponsible juveniles whom expect everything handed to them off the backs of people in the rest of the states. No matter how glum things get it never changes their spend, spend, spend mindsets. And there is no end in sight. They are both going to continue to behave like drunken teenagers at a rave and bleed the rest of the country dry. It should be demanded that they grow up by cutting off federal funding to them but it will never happen. They are bound and determined to bankrupt us all and we're going to let it happen.
Really you don't know what you're talking about. The GOP gained more seats in NY than any other state. As far as New York and California being "heavily dependent on federal subsidies" both states are net contributors to the federal treasury. In fact, if they got their money's worth from the feds their deficits would disappear.
Obama will bailout California and New York to buy their support.
Texas is looking better and better every day!
I hope the House refrains from bailing either state out. Let the lefties lead to a working solution. When adults are required, they will vote them in.
If House Republicans allow a federal bail-out of California (or New York), the Grand Old Party will be finished as a serious political force in this nation. NO ONE will ever again believe anything that they say. Their credibility will be non-existent, and they will become nothing more than a footnote in the history textbooks. Let California secede; or better yet, let it break off under the weight of its own bloat and sink into the Pacific.
Can somebody please (conservative or liberal) help me understand the economic policies of the left? I'm an open minded Christian conservative who can sympathize, though not often agree, with the social and environmental policies of the left. But the basic fundamentals of fiscal responsibility are true and universal. What is it about capitalism and free markets that they don't understand? What is it about entitlements and protectionism that they find so appealing? I would have thought these issues and their collective effect on a free society have long since been resolved by now.

The reason CA doesn't, and can't, have a balanced budget is because liberal policies cause open ended spending. No matter how high the taxes imposed on the population, there will always be something liberal politics needs to solve or salve with money. Combine that with an anti business attitude, both regulatory and environmental, liberal politics erode the very engine of prosperity that the state lives upon.
As an ex-Californian, I am glad to be gone, and wish you all well in your self imposed disaster.
Modest Proposal: California defaults. Rather than bailing out the State, the Federal Government buys the threatened state bonds. Then Congress over-rides all federal and state restrictions on California off-shore oil drilling and licenses full-bore production, with very substantial royalties going to retire the bonds. Everybody wins, if there's enough oil. If Californians don't like looking at oil derricks off Santa Barbara, tough; they should have gotten their fiscal house in order long before it came to this. And unlike some form of receivership, the state remains free to manage its own affairs - up to the water's edge.
As a native Californian, I've watched our state trend from red to blue - the watershed moment for which seemed to be the 1992 election, when Perot plus Bush beat Clinton vote-wise. Before that, sturdy Republican presidential results post-war with the exception of 1964. What changed between 1988 (Bush took California) and 1992 (Clinton took it)? Don't forget too that San Francisco in the late eighties was still moderate to left, hardly the leftist caricature it's now become. Voters there even voted to spend city funds to homeport the still-active USS Missouri there.
You article is aperfect description of what's coming - two totally dysfuntional state legislatures with Governors who have shown themselves to bePart of the same mentality-Where is Chris Christie.
The coastal elites looking down through their collective noses to the RED States America.

Call every name in the book to them: bitter, gun-clingers, incapable of understanding science, enemies, racists,....

Continue with lunatic financial irresponsibility which would guarantee a bancruptcy, if followed by individuals.

When it is time to pass the Collection Hat, they sure expect the Red States to bail them out.

I hope the TEA partiers in the Congress make sure that this time around, make New York and California sleep in the bed they have made.
In the event of a fire, Midwesterners would proceed to the exits in an orderly manner. New Yorkers and Californians would instead run into the fire, proclaiming their intellectual superiority. In both states, there are fewer and fewer people pulling the wagon, with more and more people riding in the wagon. And those riders are making things tougher for the remaining pullers. It appears they will not realize their dilemma until only riders remain.
Good! Let the fools in New York & California go bankrupt.
If people don't like the fact that they live in a majority liberal state, they're free to move somewhere.

How many additional seats will California pick up in the US House on 2012? Texas?

They don't like California, and they're already moving.

(O and 4)
Good article but you missed one thing.

There is no GOP in New York State; as an example Mr. Levy is an ex demoncrat who was "converted" by GOP chairman Cox to run for Governor. All GOP members in NYS are RINOs at best!

At some point we'll get a real Attorney General like Robert Abrams years ago and half the NYS legislature will end up behind bars!
In other words..California and New York have become Mexico. Very Rich people and very poor people and an out of control public sector. Adios

That argument would work better if California was not, in fact, the largest "producer" state in terms of innovation, especially in the tech sector. 1/3 of the nation's venture capital goes to Silicon Valley alone, which tells you everything you need to know about innovation.

(Also, I enjoy how you basically seem to be implying "any amount of government involvement up to that which I personally support is 100% okay. Any more than that? OMG TEH COLLECTIVISM.")
We will bail them out over our dead bodies.
I am a financial advisor. I sell many municipal bonds (states,counties,cities,special districts). The firm I work for will provide General Obligation Bonds (property tax based) in CA,NY and ILL but is extremely selective (due to default risk) on the general revenue bonds. Both types of bonds have to pay between 1-3% more than comparable bonds in other states. On each one billion in state debt that is only (!) 10-30,000,000 more each year in interest. Being a fiscal liberal in those states does not make sense at all but for those buying the bonds what the heck. They only get more in interest and the taxpayers in those states have to pay it. The political class, the employee unions and the fiscal illilerates in those states just don't get it. They will pay the piper, it's just a matter of when. The bond market may just shut them off altogether or just keep raising the yields on the debt or both.
I for one will have zero sympathy for New York or California when the Ponzi scheme of the ever-shrinking group of producers handing over the results of productivity to the non-producers with their hands out finally crumbles into the ash heap of history. It will end just like every collectivist society that has ever existed or ever will.

Without the Rule of Law, Laissez-faire Capitalism and respect for the individual there will be no bright future.
Well, GaryT, if local governments can accomplish more projects, that gives the state government more leeway to cut spending, as previously state functions are funded by local spending.

And I'd agree with you on the pension reform issue. Unlike you seem to be doing, I don't divide the world into "people who agree with my party" and "OMG TEH SOCIALISM."
Quayle-Palin Stepchild- the Clinton surplus? The one he had after the Republicans( the real ones, not the RINOs under Bush) had run the House and Senate for six years, derailing all his high spending plans? And then Bush destroyed the economy when Pelosi and the Dems took over congress? And faught all his attempts to rein in Fannie and Freddie?
@ Larry:

Actually, Democrats can't do much of anything anything tax-wise right now. Prop 26. (the court decided 25 doesn't actually give the state legislature authority to gain revenue.) Jerry Brown is talking about a compromise set of spending cuts and having the voters institute tax policy by referendum, but it's unclear either of those are actually going to go anywhere.
Hey Nyarlathotep,
So California's taxes are too low? Simply raising them would solve all of the state's problems? We don't have to wonder why your state is about to fall off into the ocean. Oh, and FYI, property taxes fund local governments, not the state, and those inflated property values, more than compensate for a low millage rate.
Everybody outside your own echo chamber knows that slowing irrigation to farm land in order to save the Delta Smelt and SEIU pensions are just 2 of the many reasons your state will go bankrupt. Unchecked socialism ALWAYS fails.
@ people who think Cali should "cut spending"

Conservatives are quick to say "cut spending" but slow to point out any programs they'd actually like to cut.

If people don't like the fact that they live in a majority liberal state, they're free to move somewhere that isn't the technology capital of the world or the world's 8th largest economy. I've noticed y'all only support states rights when it involves the state's right to do something you want it to.
Well, Nyarlathothep, now that you've enlightened me I changed my mind. Since the Republicans have been "reduced to insignifigance" in Sacramento, the Democrats can raise taxes all they want and will soon have a balanced budget no doubt. Huzzah for the Democrats! They'll prove once and for all that high taxes and heavy government regulation are the keys to prosperity! I think I'll move tomorrow and get one of those high paying green jobs.
Quayle-Palin stepchild November 05, 2010 at 3:23 PM
Economic wizard Bruce from Seattle says:
Say Democrats, when were you planning on explaining how you are the only people in the world that get to spend beyond their means and not be held accountable?

Yeah, nice bubble of ignorance you live in. Guess you were asleep in front of your Bush 'Mission Accomplished' poster to see that the nation's deficits were run up under Reagan and the Bushes. Then the GOP took Clinton's surplus and turned it into huge deficits and a completely obliterated the American economy.

Now we need right-wing advice on economics? Based on what, the great success the GOP had destroying the middle class?

very well written - i might add that the red states are already paying for the deficits of california and new york through the federal government stimulus package.
Concluding my today's letter to the editor of my local paper,which started out calling the Obamacare Bill a piece of bastard legislation (it had only one parent); ...California will have to go on to hell in its own hand basket for the rest of its time as a stronghold of fruits and nuts, with the inmates in charge of the asylum. Lodi,CA
California and New York, followed the age old stategy of doing the same thing over and over and expecting a different result- I forget what thay call that- whether it's insanity or stupidity. At any rate in longterm there won't be enough people in either state to matter. And when they come hand out to the feds, I intend to tell my reps and senators to say "Drop Dead, you made this mess, you clean it up".
No Nyarlathotep,

The reson CA does not have a balanced budget is that your legislature will not curb spending!
Bruce from Seattle November 05, 2010 at 3:10 PM
Nyarlathotep: "The reason California doesn't have a balanced budget is because the GOP minority blocks any attempt in the legislature to raise taxes, and property taxes are fixed at absurdly low levels."

Seriously? The *only* way to deal with deficits is to tax more? How in the world do most normal people (who don't have taxing authority - that is to say revenue at gunpoint) do it??
In the immortal words of Jerry Ford (OK, actually the NY Post, but it sounds so good)

"California and New York: Drop Dead!"
Bruce from Seattle November 05, 2010 at 3:06 PM
"The upshot would likely be a high-stakes conflict about free trade, globalization, social class, race, illegal immigration, and public-sector unionism."

Which conversation is long overdue and almost completely ignored by the Democrats and their special interests. Say Democrats, when were you planning on explaining how you are the only people in the world that get to spend beyond their means and not be held accountable? I don't think the rest of us who do have to spend and live within their means really care what your explanation is.

Time to put up or shut up.
now all it takes in 4 Democrats to defect and NO GO - I am looking forward to Washington seizing up and shutting down.
Who cares if California and New York can't borrow any more? They obviously don't know how to handle money. I didn't get a bailout when my credit card bill was due - I had to cut back!
No bailouts for liberal insane states like California an NY! If they threaten to default, call their bluff. If they're stupid enough to do it, its better than setting the precedent which will cause other states to follow their footsteps.
patsfaninpittsburgh November 05, 2010 at 2:44 PM
Another perfect example of the catastrophe that is New York and Kallyfornia

Posterboy "Alex"

The two states send high tax idiots to DC to tax the hell out of them for money that goes to other states.

Apparently, clueless can't figure that out.

"Eco friendly" business is "growing" while killing the other 99.5% of the economy.

These states are beyond hopeless because their critical mass of utter buffoons is beyond hopeless.

New York and Kallyfornia have millions of sane people who just happen to show they are sane and don't live there anymore.
Red State Conservative November 05, 2010 at 2:36 PM
Let NY & CA go bankrupt! If the voters in those states are too blind or too stupid to see what their ill-advised, backward, financially illterate policies are doing to the futures of their states, I say let them suffer the inevitable consequences of their actions. Perhaps THEN they will understand the correlation between fiscal insolvency and unchecked, Democrat rule and FINALLY vote to change it.

Until then, let them rot!

In other words, you aren't from California. The reason California doesn't have a balanced budget is because the GOP minority blocks any attempt in the legislature to raise taxes, and property taxes are fixed at absurdly low levels.

This is a known problem for pretty much every single person in-state. I wouldn't expect an out-of-stater to know this stuff off the top of his head, but at the very least do a modicum of research before you start ranting about CA deficits.

(Also, as Alex mentioned, we pay out more than we take in. So we are currently funding your state's welfare. You're welcome.)
@ Alex, no, the eco-friendly sector in CA is not the fastest growing isn't growing at all, though various Silicon Valley elites have invested a lot of money in stuff the taxpayers will have to subsidize to make "economic" The defeat of Prop 23 would have chilled those nvestments, what a shame. See also:

i (troubles of Obama's favorite CA solar panel maker)

California, Nevada, Illinois, and New York are so deep in debt that the only salvation that they can see is a bailout by the Federal government. Democratic leadership is the most likely to ask for (and expect) such a bailout, which makes them a more desirable choice.

The fly in the ointment is that the rest of the country would have to okay the bailouts, and I don't see the Senators from North Dakota voting to give billions away to pay for California's spendthrift ways.
Reading your 2:21pm post, I would assume that you would be for repealing the sixteenth amendment to the US Constitution and re-instating the requirement originally found in Article I, section 9, to wit: "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken."
The bailout of states, particularly CA, NY and IL, is ongoing.

Should New York State and California default, the federal government should not provide them with a bailout. A bailout would validate those states' profligacy. The responsible citizens in this country should not have to bear the burden of providing a bailout to the moochers in those states!
You are completely wrong about everything.

The reason California and New York don't have balanced budgets? It is because our federal income tax, paid by our residents here in California, is taken from us to pay for programs in every other state. We don't need a bailout, we just need our money sent back into our state. We've been bailing out the rest of the country for half a century. See:

Oh, what a surprise, all the states run by democrats receive less than they pay, while all the red states receive much more.

Prop 23 would have killed California's eco-friendly businesses - which is probably our fastest growing sector. It would have helped the oil companies, but they are not based in California. Oh, and the fact that it would kill our environment is not inconsequential either.

California also has budget problems because of that foolish super-majority requirement. Guess what - almost every state requires a simple majority. I don't see any complaints from you about that rule in all the red states which ignore the democrats there.
Jerry in the Interior November 05, 2010 at 2:20 PM
Let California and New York voters continue their experiment in socialist utopianism--see where it gets them. Once they both implode for good, maybe the whackjob voters there will wake up.
The financial collapse of the US likely will start with these states and the Democrat leadership's policies and past excesses. CA may be belly-up in a couple of years, as the tax base shrinks from accelerated job migration due to the Global Warming Final Solution. NY state could at least drill for gas on the Marcellus track. CA is trying to shut down oil/gas production. Its AB 32 is a suicide pact.
The confrontation projected in the final paragraph of the article is inevitable if the rascals are to be thrown out. I have lived in California (north and south, urban and suburban) most of my life, and it breaks my heart to see what has happened here. However, I also remember pre-Giuliani NYC, so there is hope.
Let California, Nevada and New York take care of themselves since they are intent on self destruction. No more taxpayer money to bail out people who will not work to save themselves.
Let 'em stew in their own juices!
These states are just proof that the sheep in America just vote if someone has a (D) or an (R) before their name...

sad really.
This analysis is extremely simplistic... The unemployment rate of both New York State and New York City are below the national unemployment. People are continually moving into New York City despite higher taxes. The city is seen as a desirable place to live for many people; this won't change at all. As the financial and other key industries recover, NY's tax collections will increase, and the budget will be easier to balance. Cuomo ran on a platform of reducing some public sector spending, so some cuts will be made, but overall NYers are happy with the system that is set up.

California's issues are a bit more challenging, but again the state has many advantages (educated population, beautiful scenery, desirable cities, etc) that it will eb able to leverage in future years.
In Florida, we just love those productive citizens and businesses seeking tax breaks after leaving those two states.
As our newly elected conservative Governor and former businessman said in his acceptance speech yesterday, "Florida is open for business!"
It's time for the sane interior states to Just Say No. NY & Mexifonia need to be starved financially. Only by starving the beast can those two states be brought back to reality. This coming from a NYS resident.
This is a brilliant article Mr Siegel.

It is so completely accurate and true.

I was born in southern California and grew up enjoying the beaches of south Orange county, a tropical paradise.

After serving 3 years in the US Military, one year overseas, I returned home and started a web based business.

My business is now completely internet based (so I can operate it from anywhere), and I'm working in the mobile tech sector, which is booming, and driven by northern California technology companies.

The state of California already takes over 10% of my personal income.

As my annual income rises, and I see my business revenues grow, I am also entering the peak earning years of my life.

As my income grows, as the result of my own initiative and legal, business risk taking, the state of California will continue to confiscate more dollars from my personal bank account to redistribute across it's entitlement culture.

I will most likely get one chance in life to save and invest a significant amount of money from my business venture. This will be investment I plan to last me for the remainder of my life, and investment that will take care of my family.

Over the next couple of years, I will have to decide if I will move to a tax free state, in order to maximize the positive possibilities my financial future.

Thank you for writing the article.
Hey Paul 52. The fact that CA and NY send in more taxes to the Fed, than they get back, sounds like the typical result you would get from any progressive tax scheme. So, those 2 states should feel proud to be doing their patriotic duty, and libs like you, should be happy that we are sticking it to the rich. Now, if CA and NY are paying their fair share in taxes, but blow the rent money at the race freakin hoo.
Author needs to add Illinois to the list of states where voters still don't get it
The ending result will be MORE borrowing on Bond issues until they are highyl degraded in value, then NO more borrowing as they are in default or worthless. The the Bond holders and public pension funds are in big, big trouble. Unions and penions will be greatly reduced or modified ELSE eliminated = THIS IS COMING...

Frustrated Californian November 05, 2010 at 1:05 PM
I live in California, belong to a Tea Party and voted GOP. It is extremely frustrating to see the rest of the country (except NY of course) turn against Obama's policies while Californians go further left. I am seriously considering leaving this brainless state before it totally sinks into the ocean. What a mess!
Seems 'Liberalism is truly a mental disease'
. . . While assesing California, New York, or Illinois has anyone paused to consider the 'sliding over a cliff' the state of Michigan has gone through -not a pretty template for prosperity or sound fiscal conservatism ?
And with all the "bailout/buy-ins" our federal government has already forced upon taxpayers for auto companies, banks, etc. . we already see the "lack of benefit" to our country, and to Michigan's infra- structure. So how has this provided for and bolstered free market economics?
Like trapping citizens with punitive homeowner taxes to stall a mass exodus from Michigan - we the majority are all forced to suffer by the minority! Also one may need to consider failed policies and oaths by the Obama administration to uphold simple basic essentials like PROTECTING OUR BORDERS !
Seems Mr President is ripe for impeaching were it not for Judiciary activism ready to save his bacon by further convoluting tenants our country was created upon! Arizona and Nevada are overrun by illegal immigrants, and drug cartels !
Where is the deployment of military force to protect our people and land ? All we get are warnings to citizens to aviod the respective areas of intrusion ! Wake up America the UIS is already invaded without any real protection nor defense!?
The "kunbaya" of political correctness is far from disemboweled itself but continues to disembowel our land (gee, maybe someone should consider like a repeal of what the 'chipmunk' Teddy Kennedy ushered in -changing our immigration policies to "rights" and with it an intentional bent creating a 'captive' class of additional voters for Dems to benefit from!
Our taxes for medicaid and other funds all continue to be siphoned off; depleted without any response from our elected officials(just Mexico's president). The strangling astounding figure of tens of millions of dollars for just one hospital in Texas treating patients!
Just one of many hospitals compelled to serve an overwhelming majority of illegal, uninsured patients and other institutions all overwhelming a system by proxy of convolution of provisions intended for legal citizens.Now give the rest of our country's citizenry concern for cardiac arrests adinfinauseum!
There's a lot of work to be done to get the horses back in the barn before it burns down and while the fire is put out! Our national issues are being imploded inclusively here in our homeland after having done internationally the opposite exclusively playing world police - serving/addressing world issues.
California, New York, and others need to be addressed but so does national bleeding of once noble, well designed, now twisted maladaptive and intentionally flawed policies meant to weaken our country from within! Why, we can't even maintain integrity in national policy only the veneer of it and that is wearing too thin too long in use!!

What state has a greater federal tax paid vs. federal services received deficit than New York? We send billions more than we get back every year.

So in this analysis, how do you account for things like the AIG bailout? Is that allocated to NY?
Connecticut appears to have elected a Democrat to the governorship for the first time since 1986. Both the state House and state Senate saw a few Republican pickups, but both chambers are still overwhelmingly Democratic. Connecticut has a fairly massive budget deficit, and the results are not going to be pretty.
"solvent states of the interior..." What planet a and those would be, hmmm, Wyoming and Montana?
Uh, Fred, to suggest that the "solvent states" need to "bail out" New York is to ignore that NY's tax dollars have been bailing out these so-called solvent states for decades. NY subsidizes the South, not vice versa. What state has a greater federal tax paid vs. federal services received deficit than New York? We send billions more than we get back every year.
Let those two states rot in hell...

Oh yeah, one other thing. As long as a state is bankrupt they should not be able to participate in national elections until thier own state fiscal house is back in order.
Sounds like we need to let California and New York solve their financial problems alone with no Fed help. Their voters want Dems wild spending so let them pay the piper.
Yeah well, the voters have spoken but there will not be anymore state bailouts so I guess these folk can kick back, take a toke or whatever and spend more money and soon fall into insolvency. Then they will both go red when there is no more cashola from the rest of the country.
There needs to be a decision made now and a clear message sent to NY and CA. There will be no bailout for you. Now, deal with it.
As a Texan, I welcome California and New York's recalcitrance and obstinacy. We are enjoying the fruits of their idiocy in the form of an influx of talented, hard-working, job creators, who are fleeing those liberal havens for the greener pastures of common sense and normalcy. They will change their ways eventually because government cannot function on public service worker alone!
Oh this is going to be entertaining. In choosing to vote for continued democrat control, NY and CA have chosen to cling to the Progressive agenda even though it's killing them. They will now become a case study in how liberalism inevitably leads to a failed society. There is no way that the rest of the country will allow their elected officials to bail them out of this. This will be a very painful and fully deserved lesson in economics to residents of CA and NY. It's fascinating to see the numbers of productive citizens and businesses leaving those two states. The rest of the country can survive just fine even if NY and CA go bankrupt and have to do a complete restructuring. In the long run everyone will be much better off if the lesson is learned, even if it is painful for a while. There is no doubt in my mind that any effort to single out CA and NY for federal bailouts will be soundly rejected, so now the only question is when exactly does the roof collapse on those two failed states?
As an unfortunate resident of California, I would like to say that the author has accurately articulated the problems facing our state. Voters in our state are selfish and self destructive. It will be interesting to see how they try to balance the budget. Most likely, they will levy even higher taxes (we are already second only to New York) and fees...and they will drive more businesses out of the state.
It not that people 'from' California are so liberal.

The problem is that people who are liberal - migrate from other places to California.

You will find the average native Californian to be quite normal and rather conservative.

Next, the 'public sector unions' are absolutely destroying California - city by city.

When you rob Peter to pay Paul - you will always have Paul's support.

Maybe they forsaw the future when they made the epic movies "Escape from New
York" and "Escape from LA"...
Don't forget about Illinois. Illinois has a very large structural debt, is looking to borrow another $3.7 Billion and is completely controlled by the Democratic machine.
Not all Californians voted for the status quo. Being a life long Republican, I'm ashamed and disgusted by the actions of my home state. My husband and I will be leaving the state asap.
Excellent analysis. I,unfortunately, live in NY -at least until I retire- then it's off to a low tax state somewhere in the south or west. My children are likely to move there soon, so I will be joining them. Rest in peace the once great Empire State of New York. You have been humbled by years of deficit spending, high taxes and the flight of the middle class. All of this thanks to the Democratic Party which you have just re-elected.
@Paul '52

Reading your bits there about NY paying so much in taxes is an interesting axiom to explore.

The reason NY pays so much is because a very wealthy elite lives there, Long Island, Hamptons, etc. A good chunk of that elite is involved in showbiz, publishing, etc. But the vast majority of that tax money comes from Wall Street and its ancillary operations. I bet the top one percent of NY residents pay more than 50% of tax receipts recovered from the state by the Feds.

Now we see some other "taxes" come into play though. The vast majority of TARP funds propped up not the financial system per se, but that stinking mess of a financial system based in New York. Ditto for the Fed printing a trillion bucks out of thin air. All these New York operations that pay all these rich pricks who then dutifully send 35% and more to D.C. would be fini without the nation collectively depreciating its currency by a trillion bucks and floating a loan from our Communist stooge-creditors in the PRC for another .7 trillion.

And without Wall Street what does New York pay? Would the state still be sending in more money than it got back from the Feds? Outside of the financial biz being centered in NYC (and centered there by fiat when you look at the special setups for the NY Fed, FINRA, SEC laws, etc.) there isn't much else in NY making money to pay those taxes.
"The coastal giants would no doubt respond by threatening defaults, which could affect the credit standing of the entire country, since many of the bonds are held by foreign investors."

Nonsense. If a state does not deficit spend then it is not affected the price of credit. The statement presupposes the foreign lenders are dumb. They are paid for their risk when investing in CA & NY bonds.

If the price of credit is the only counter argument to not bailing out profligate CA & NY et. al., then CA & NY bond holders and public pension funds are in big, big trouble. I look forward to the day.

Prudence must not pay for imprudence. Imprudence must enjoy the fruits of their desirers.
Governing California and New York is an easy job..if you don't intend to pay your bills.

I live in southern California, the front lines of this culture war. Eventually California will ask for comprise; "Please pay half the debts we can not, and never intended to pay." Please understand that the politicians essentially paid off the unions on the states credit card. They never intended to pay the debt.
California and New York should NOT be bailed out under any circumstances. If they want to keep voting for the idiots who have run their states in the ground, that is their choice, but they must be made to deal with the consequences.
Middle Class Californian Here to Stay November 05, 2010 at 11:49 AM
Here in Orange County California the Republicans recieved the majority votes for all the state offices.

As someone who lived there for two years, I've always wondered how a place like California could be broke at the sovereign level. Its such a rich place in physical and human capital.

But with the Democrats running things, California should be sufficiently run into the ground ~24 months to force reality on at least the unions. Without a central bank, checks bounce no matter the laws you pass.
I doubt very much the new US House will vote to approve a bailout for either of these states. Given the states in question are so Blue and the House has gone Red there is no economic OR political reason to approve such a measure. To put it simply NY and CA are on their own.
It shouldn't suprise anyone that two of the most liberal states are also two of the ones who are the most "broke" and broken! America has traditionally provided financial support to states that suffer natural disasters that are beyond the control of the people. The New York and California financial disasters are self-inflictd because these people keep voting in politicians who can't do anything but spend.

Time for America to cut them off. We never should have given them money in the first place. Why should taxpayers from other states pay for these idiots? I guess you'll have to ask the first Jackass whose apparent solution, as always, is to spend other peoples money!
So, Just 2(!)states are poised to take down the entire country using extortion tactics as leverage against the rest of the country's socio-political economic policy backdrop?! And the tail wags the dog! And then does maybe Marshall law in those 2 states comes in to play ? Either way what a fiasco!
You didn't mention Illinois. Currently it's in worse shape than CA and just re-elected it's sitting Democratic Gov. Both houses are controlled by dems. They are about to borrow 3.7 billion to pay pension obligation.
@Paul '52 and Urbanite, As an affluent NYer who pays a boatload of taxes in various flavors, I initially had the same thought. But I then realized that while NYers pay more in federal income taxes than the state gets back via federal programs, the author is referring to a different phenomenon. Over the last couple of years, the federal government has funneled extraordinary transfers back to the states not for the purpose of funding the federal government's payments on federal programs, but rather to plug holes in state budgets (i.e., the difference between state expenditures and state revenues) by, for instance, picking up a portion of those states' share of Medicaid payments, and to fund salaries of public workers (teachers, to take one example). This budgetary hole exists depite the fact that NYers pay among the highest state, local and real property taxes in the nation -- in other words, the NY legislature is addicted to spending.
Could NYers better afford their state government if we didn't pay an excess of taxes to the federal government over and beyond what we currently pay? I suppose so, but good luck with that.
So sorry if you conclude that this is inane babbling from a right winger. I happen to be a lifetime NYer who thinks that we have some serious problems in my home state that have been masked for the last few years by Uncle Sugar. But I think this article is right -- that is about to come to an end.
CA ($138 billion debt) and NY ($122 billion debt), after looking down on most of the other states, are probably going to come with hat in hand to Washington (taxpayers) for bailouts to cover their Liberal failures. If they do come, Congress should require some effort on CA and NY's part to correct their errors:
tax cuts, business breaks, break off with public unions, cut illegals' drain on the budget, etc. If not, then let them beg and sweat until willing to let a neighbor state with a balanced budget have control to guide them out of their pit. Now that would be an idea whose time has come. When CA and NY look down on the rest of us, they are in fact "looking down from below."
For those on the left who claim New York and California subsidize the rest of the country.

If that is the case then you should support downsizing the federal government. Then your states no longer pay more to the feds than you get back. The money you no longer send to the feds you can spend on the same programs as used to be funded on the federal level but now administered by the states.

That would be a win win. You no longer get gypped by the federal govt and Republicans get their downsizing of the federal government. If red states wind up no longer getting subsidized by your states, well then the Republicans wind up having to deal with the consequences of their actions.

Everybody wins. So is it a deal?
patsfaninpittsburgh November 05, 2010 at 11:26 AM

The perfect example of the disaster that is New York and Kallyfornia. They have too many of them.

The only solution for these two states are policies that attract non Urbanite's and Paul 52's.

"Thinking" at that level does make the case for abortion so all is not lost on the libturd front.

Eric Summers:

I hear you. I left California in 2008. You will find life infinitely better after leaving that hellhole of a state.

I live in Washington state which has quite a bit of Progressive political influence, but not as much as in California and I think the Progressives here are in general a little less wacko than those who run California. Bottom line I don't believe our state is destined for the kind of death spiral that the politicians have produced in California.

Voters here rejected by 65% to 35% what would have been the first state income tax, one levied on high incomes in order to try to appeal to class resentment. That shows me that there is some fundamental sanity among the public here, a recognition that if you want prosperity you need to be hospitable to business. There is a lot of news buzzing around about companies expanding and hiring more people now that they know the public has driven a stake through the heart of the income tax.
Nice article.

No more Fed bailouts for ANY business or ANY states! Not until they clean their own house up through clear and consistent spending cuts and financial responsiblity. Why should the dilligent be punished for the financial irresponsiblity of the foolish?
Paul '52's point is well taken, but that argues for less federal control since they are redistributing wealth that NY can not afford to have taken away.
Paul '52. Finally some wisdom amongst this inane right-wing babbling. Careful, when you use facts on a right-winger he must revert to emotional babble.

California aside, the Midwest supporting New York? Are you serious? If it wasn't for OUR NY tax subsidies supporting the federal government those clown states in the flyover region would be wastelands (not that with their vanished (Thank You GOP!) manufacturing industries they aren't already).

The corn and Bible belt doesn't contribute to the national economy unless its sucking off agricultural subsidies for their bankrupt farms. But voting against their own economic interest? Well, let's just say the Republicans know what they're doing, the proof is in the sad state of the Midwest.

What a joke. NY goes under, say goodbye to Dubuque!
Paul '52: The people of California and New York consistently and increasingly vote for the very politicians that maintain the inequity you're complaining about.

Why should states sent money to Washington at all, just to have Washington return the money reapportioned?
Both New York and California will soon face "obligations" that they cannot remotely fulfill. The old standbys (higher motor vehicle fees, surtaxes on this or that, budget legerdemain, accounting tricks) can't cut it any longer. Further borrowing may not be possible, and if anybody does lend these states money, it will be at high interest because of the risk.

It's as if I had a billion-dollar note due next summer. Fat chance.

As the situation worsens, the flight of productive people of all races and ethnicities will accelerate. And as Armageddon approaches, both states blithely re-elect the politicians responsible for the mess.

It is far too late to start practicing austerity, so the only answer is to get a bailout. Jerry Brown and Andrew Cuomo are soon going to be pressuring Obama with the "too big to fail" argument, and the President will truly be on the horns of a dilemma.

How Obama will respond is anyone's guess. I suspect that his instinct will be to go ahead and cough up the money, but doing so may be politically impossible.

How about a flat 50% state income tax? A 49-year-old retired prison guard can then return half his $200,000 pension.

The coming months are going to be horrifyingly interesting.
Great article. Absolutely the soon to come battle: On one side, the Coastal elites; their allies ( spelled public sector unions ); and, Coastal deluded citizenry which believes that all things are possible without concern to who pays for it. On the other: The rest of the country, which will refuse to accomodate them. Waterloo for one side, or the other. My bet is on " rest of the country ".
My family and my state (Indiana) lives within their means. We have elected leaders who will now impose this simple reality on the spendthrift cosmopolitan elite. Bring on the fight: Mitch Daniels in 2012.
California the Golden State ? - How much pain will you endure, before you wake up ?? Glad I took my money & left a few years ago ! California is Obama & the Democrats model for their American future, which is fast becoming the poster child for an bankrupt third world State!

An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty or into fleeing.

The pandering of Left Wing Democrat Politicians to their constituency of Welfare leeches, Illegal Aliens Parasites, Public Unions and Left Wing American haters are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, crime ridden, dysfunctional state!

For years California has ignored economics 101 by rewarding Public employee with wages and benefits that far exceed any in the private sector or tax payers ability to pay, to buy their votes while importing poverty, Criminals and uneducated illegal parasites from Mexico, which increased Medical, Welfare, Crime, Prison, disease, etc. & adding estimated costs of 20 billion per year to Calif. State expense to provide for the invading horde of Illegal Aliens while exporting business and educated working tax payers.

I must say it's honestly funny, indeed downright hilarious to see people saying that the rest of the USA has to bail out NY.

You uninformed minions of the right should get an education. See the extreme right wing tax foundation website for data, here:

NY sends about $1.25 - 1.30 to DC for every 1.00 it gets back. If we were on a 1:1 ratio, NY's state & city taxes could be cut by over 20%.

Alabama, Mississippi, Nebraska, Alaska, all on welfare. NY, NJ, CT, MD, MA, are keeping you second & third world staters afloat.
Good I hope Republicans become completely irrelevent in both those states, that way when they crash and burn the blame can be placed squarely where it belongs on the liberal wing of the Democratic party.
I am ashamed to say this, but I WANT NY and Cali to suffer. Gold-plated pensions and health plans for these government union hogs make me sick. We have the same problem - albeit on a much smaller scale - in Omaha where the police and fire unions are driving the city off a cliff financially. And they refuse to back down or back off. BAST*RDS!
Excellent piece.
Can taxpayers can be forced to pay for political graft in the form of defined benefit pension plans which can never be cut? If so, why not pensions 500% higher than the private sector? 1000%?
Whatever leftists and unions can agree upon is sacrosanct? We'll see if they can mandate inter-generational slavery. This is the crux of the battle: our servants have enslaved us to their greed.
Time to pay the piper no matter your place of residence. Freedom to choose is our privilege and our responsibility. The responsibility for the debt belongs to California and NY - if it affects the rest of us that is an unfortunate cost of having a large family with many points of view. Enabling them to continue will only increase the eventual pain.
What does America do when 2 states eventually declare bankruptcy?

Does America bail them out? Do we tell them to take a hike?

My guess is that these 2 states will simply help sink America into its own bankruptcy and America will take 50+ years to recover.

Hyper inflation, illegal to own gold, silver, etc - we have see this all before but this time around Americans will be leaving America for better opportunities elsewhere - a mass exodus of our most gifted citizens.

Thanks to Liberalism - sharing the wealth has never worked and will never work...
These are salient facts:
1. Americans at the median are the LOWEST taxed people in the first world.
2. The USA has the lowest level of government services in the first world.
3. The states you wish that NY & CA would aspire to mimic are second and third world entities, dependent on federal largesse (largely at the expense of taxpayers in NY, CT, MA, MD, CA).

Take a look at life expectancy by state, here:

See? You want New Yorkers & Califonians to shave 4 years off our lives like they do in Jim DeMint Ville, or should we make it 6, as in Haley Barbour Land?

Hey, Fred: A lot of us here in NYC make 6 figures & up working in our offices, and cabbies & motormen get us there, and at the end of the day a person's gonna come in & clean up after us. Those people gotta have a place to eat, and sleep, and see the doctor, and in NY & CA it's expensive. But if they're not there, we can't make what we make.

Sometimes you just gotta pay for what you get.

It seems to me that Meg Whitman would have had MUCH more success lobbying for a state bailout.

As it stands, CA elected a stronger democrat majority and sent Gov. Moonbeam back to the statehouse. They sent Barbara "No Ma'am" Boxer back to the Senate.

You made your bed, California. Now lay in it!
There is a simple term I have heard used these past two years more than then in the pervious 20 years .
Absolutely nothing Obama , The radical Socialist left ,Calif ,NY , the moronic Health bill , raising Taxes in terrible economy and blindly looking at the Illegal problem Makes any sense what so ever .
Obama and the far left party should change their name to the .....
"Makes no sense party " .
Siegel says "gridlock" like it's a bad thing
Maybe eventually, results will pierce the myopic propaganda that calls the rat capital of America the Big Apple and the nostalgic belief that the country follows CA.

However, we must stop accepting rank corruption as unmentionable and object to it vigorously.

People who live under one party machines do npot have the Republican form of government guaranteed by the constitution. But they have been conditioned to believe that it is the same everywhere.
Bring it on. It is time that Congress stop feeding the spending habits of the pigs in New York and California, and let those states drown in the corruption of their own political stew.
The logical next steps for California and New York (why is it no one mentions Illinois?)is a PBGC audit re public employee pension (and other) liabilities. Followed by the creation of a federal bankruptcy court for state governments as a prerequisite for state workouts. Under current law-see Illinois state constitution-the preferred creditors are-no surprise-public employee unions. A GM exercise in bondholder default is highly likely if the states in question are left to their own poltical devices.
Not one penny of federal (tax payer) money for California or NY bailout. They voted democrat. Let the democrats get them out of their mess or may they fall off into the ocean.
Add the disgrace that is Massachusetts, too.
Barney Frank? Again?? Really???
Jim McGovern????
These people will never learn!
What an embarrassment!
I hope California and New York default. The sooner the better. This will cause investors to stop funding our spending binges. The Obama debacle was bad enough to show most states the error of Leftist politics. Not California and New York. So they need to go down until the idiots wise up. I live in California.
let CA go backrupt, please we need to rid ourselves of the public sector union debt. Bailing us out only delays the inevitable
My home state of California is about to receive a harsh lesson in the realities of socialism. The Governator leaves a poison pill in the form of AB32, a draconian Cap And Trade scheme; the voters have turned the treasury over to the Dems with Prop 25; we now have re-enthroned the worst governor in our history. Possibly the impending bankruptcy of the state will do to the state what Obama has done to the nation, show them the folly of voting for Democrats. I cant wait for Jerry The Jerk to start blaming his own failures on Arnold.
It's nice to see a cogent analysis of the country's problems. The City Journal is a voice of sanity in an insane liberal world.

City Journal should take the lead of leftist publications and delve more into political activism, addressing strategy and tactics which might pull this country back from the brink.

Naturally, California and NY will try to continue their profligate spending and have the remainder of the nation pay it. We will not pay. The "stimulus" was nothing more than a subsidization of California and NY's public unions. No more.
CA and NY enjoy looking down on and demeaning those of us in states that are solvent and not in their financial boat. They made their union, free-spending bed and now they must lay in it as those of us they scoff at refuse to use our hard-earned tax dollars to bail them out.

CA and NY voted on Tuesday to continue on the road of self-destruction so why should America pay for their stupidity?
Although I agree with much of the description of the problem, I do not see the predicted outcome as likely. I believe that we in NY have seen the last of federal dollars bailing out the state budget. What this means, I think, is that Andrew Cuomo will have no choice but to force the NY legislature to deal with the problem itself. Will they do so responsibly? I seriously doubt it, and expect more of the financial blue smoke and mirrors that we have seen for far too long in this state. And when that reaches the limit, the choice will be between cuts and taxes. The outcome of that debate will turn largely upon Andrew Cuomo's decisions and the balance of power in the NY Senate. I voted Republican in one of the three races still in doubt, and have my fingers crossed.
Fifty Staes--50 wonderful experiments. Some will suceed, some will fail. If we keep subsidizing failure, we disincentivize success. Let them fail and start over.
CA and NY are like free spendiung drug addicts. As a midwest taxpayer, I have no intention of using my tax dollars to help facilitate their addiction and continued election of representatives who advocate more entitlement programs to help them win re-election. Both States need a "tough love" leader like the Governor of NJ.They are the poster children for why you should not elect liberal politicians......they will spend not their own citizens' money but then ask for handouts from the rest of the country. Welcome to new morning CA & NY, the electorate has spoken and the free lunch program of federal subsidies is coming to end, get used to it!!!
Take a look at the new Senate map of the USA after these elections. What we need is a big laser, start cutting out the west coast states from the Canadien border down to Mexico, and don't forget to lop off Harry's crazy state along with them, and let it drift into the ocean. Hopefully, the tides will take this chunk across the ocean and hit China and Russia. Think what they'll look like in 30 years after it hits. It would be worse that a nuclear strike. Our nation will be saved. If that works, we can focus on New York and New England.
Picture Barney adrift in the sea heading for Europe. It's a nice thought, isn't it?
California and New York (among a few other states) are drinking the same Kool Aid. I guess they enjoy having a lousy economy, high taxes, no jobs and big government under Democratic rule, since that's what they voted for this time around, as usual. How else does one explain Barbara Boxer's re-election? She is about as much of an Obama-Pelosi clone as you're going to find anywhere. Yet, isn't California in big economic trouble? What has Boxer done to help that state? Well, Califnorians and New Yorkers, enjoy your Kool Aid. You made it and now you have to drink up! The rest of the country saw red and passed up your Kool Aid.
I hope to goodness that we do NOT bail those two states out....that would only enable their incompetent ways. They are addicts and they need to hit bottom and go on a 12 step program
jay hoenemeyer November 04, 2010 at 10:19 AM

BTW , as this is about to become a war , one thing which needs to be corrected immediately is the vocabulary . " Public Sector "is far too benign a term for the opposition .I would suggest "government " or "state-controlled" union. Perhaps , there are better labels , but it must be remembered that to control the vocabulary is to control a great deal of the debate and its outcome .

Jay, you make an excellent point.

I live outside Chicago. Illinois is facing bankruptcy sooner than most states because of the high cost of public sector union pensions. At this writing, the sitting democratic governor, who's been in office for two years, (and received the blessings of the public sector unions, has done nothing to address the problem. Yet, with the help of the public sector unions, and the same people outlined in the article, he holds a slim lead against his republican challenger.

There is no way out of this unless taxpayers go to war with the major beneficiaries of big government.
I guess the Public Employee Unions combined with the minority vote are just too much to overcome in NY and CA. Too bad for them. Fortunately, the Repub House will be able to shut down the State bailouts that the Dems were planning to do. I say not one frigging dollar of federal money should be use to prop up these grossly irresponsible States. Let them go into default; let them reach rock bottom and shut down their universities and police depts. Like a drunk, I'm afraid nothing short of complete collapse will enable NY/CA to see the errors of their ways.
Simple. Repudiate the debt. So what if it kills the credit rating? Borrowing is what got them in the mess to begin with. Besides, investors would still loan anyhow. Who better to loan to than a state with no debt? The "that was then, this is now" mentality that exists in pro football where a known and habitual cancer always gets picked up by another team, exists here as well.
California and New York can no longer compete in the real world. Their business sectors are dying and fewer industries will remain viable. As larger numbers of educated whites and asian americans leave, an ever-growing underclass of poorly educated democrats, unable to find decent jobs, will require more taxpayer-financed money and services, supplied by highly paid union government employees. Sounds like a great future to look forward to.
The most likely outcome is that Cuomo will lead New York and New England out of the Union. The nation is lost. Imagine there's no country. It's easy if you try.
Obama and the loony left wing of the Open borders, Multiculturalism wing of the Democrat party must be the only species on the face of the earth that cannot or will not learn from experience, even Animals learn from experience!

The Socialist countries in Europe , Britain, France, Germany, Greece etc. have finally recognized Socialism and the Welfare State with unlimited immigration of uneducated third world parasites flooding in to get on the public dole, does not work and are cutting back government, including numbers, wages, & benefits in order to survive as a Nation and returning to capitalism.

While here in the USA Obama and the Democrats are hell bent on taking the USA to a welfare socialist paradise in spite of proof all over the world and in the failed Blue States here that it does not work.

Illinois, Calif, New York, New Jersey, all Blue States that have been controlled by Democrat Majorities for years and long enough to try there taxing, spending and vote buying of public union members by giving wages and benefits that is bankrupting the government while pandering to illegal Aliens, are now seeing the results, all are bordering on bankruptcy.

Now Obama is following the same blueprint on a vastly bigger scale for the rest of American using 100,s of billion of the simulate money to reward Democrat supporters and to keep the under worked and overpaid public unions in jobs and buy Workfare & Welfare votes!

The same multi-trillion dollar con job Obama is attempting, by open borders and giving Amnesty to the invading horde of Criminals & Uneducated Prolific breeding third world parasites & with chain immigration all the ones still left in Mexico to buy 10,s of millions of welfare votes for the Democrat party with money borrowed from China while bankrupting this Nation.

With the future & further goal of turning the USA into a Spanish speaking Third World Slum modeled on Mexico but controlled Lock, Stock & Barrel by the Socialist/Democrat party Dictatorship of the United Sates of Mexico!

Capitalism is the unequal sharing of wealth, Socialism is the equal sharing of misery, with the exception of the elitist ruling class they still live like royalty on the misery of the rest, which is Obama's and the Democrats plan for Them & Us.
California the Golden state, Obama & the Democrats model for American future, is fast becoming the poster child for an bankrupt third world State!

An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty.

The pandering of Left Wing Democrat Politicians to their constituency of Welfare leeches, Illegal Aliens Parasites, Public Unions and Left Wing American hater,s are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, crime ridden, dysfunctional state!

For years California has ignored economics 101 by rewarding Public employee with wages and benefits that far exceed any in the private sector or tax payers ability to pay, to buy their votes while importing poverty, Criminals and uneducated parasites from Mexico, which increased Medical, Welfare, Crime, Prison, etc. & adding a estimated 16 billion per year to Calif. State expense to provide for the invading horde of Illegal Aliens while exporting business and educated working tax payers.

Like all Socialist & Marxist States the results have been a astronomical increase in social welfare, schooling, prison cost etc. and a lowing of Living standards, Education standards, Tax receipts & finally Bankruptcy.

The policies of Obama and Wash. DC Democrats are intent on following Calif. policies and are rewarding the Lazy, Corrupt, Criminal, Greedy and Stupid while punishing the tax paying, Law abiding citizens that pulling the cart and carrying the load.

Amnesty & Citizenship as a reward for their invasion of the USA, will result in the rest of the USA turned into a Spanish speaking third world slum, modeled on Mexico and follow California into a polluted, over populated, Spanish speaking third world Nation of Crime, Corruption, Poverty, Cruelly & Misery!

This will result in a population depending on Welfare and the Democrat party, thus assuring the lock on power for the Socialist Democrat party of the United States of Mexico!
Here's a good discussion of the differences between CA and NY vs. the rest of the country. Basically as you suspected, the very wealthy who care more about power than incremental taxes combine with the urban poor and the public sector unions to bleed the state, which drives the middle class out and reinforces the Dem coalition hold. Potentially all of New England goes the same way.
I'm sick of bailing out California and New York! If they want to keep electing liberals to spend themselves into oblivion, then I hope Congress stops bailing them out. The fact that they have less Republican congressman is encouraging because they probably won't have the votes to pass anymore bailouts!
California the Golden state, Obama & the Democrats model for American future, is fast becoming the poster child for an bankrupt third world State!

An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty.

The pandering of Left Wing Democrat Politicians to their constituency of Welfare leeches, Illegal Aliens Parasites, Public Unions and Left Wing American hater,s are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, crime ridden, dysfunctional state!

For years California has ignored economics 101 by rewarding Public employee with wages and benefits that far exceed any in the private sector or tax payers ability to pay, to buy their votes while importing poverty, Criminals and uneducated parasites from Mexico, which increased Medical, Welfare, Crime, Prison, etc. & adding a estimated 16 billion per year to Calif. State expense to provide for the invading horde of Illegal Aliens while exporting business and educated working tax payers.

Like all Socialist & Marxist States the results have been a astronomical increase in social welfare, schooling, prison cost etc. and a lowing of Living standards, Education standards, Tax receipts & finally Bankruptcy.

The policies of Obama and Wash. DC Democrats are intent on following Calif. policies and are rewarding the Lazy, Corrupt, Criminal, Greedy and Stupid while punishing the tax paying, Law abiding citizens that pulling the cart and carrying the load.

Amnesty & Citizenship as a reward for their invasion of the USA, will result in the rest of the USA turned into a Spanish speaking third world slum, modeled on Mexico and follow California into a polluted, over populated, Spanish speaking third world Nation of Crime, Corruption, Poverty, Cruelly & Misery!

This will result in a population depending on Welfare and the Democrat party, thus assuring the lock on power for the Socialist Democrat party of the United States of Mexico!
Amazing.Will there be no day of reckoning in California?
I say they can freeze to death in the dark!
Both States need to tighten their belts and
manage their monies like all the rest of us
"poor middle class" are having to do.
An Igor Panarin moment possibly getting closer. May you live in interesting times ...
I like it the when your description of multi-cultural working middle class of New York and California Public sector unions. As opposed to middle and working class of the heartland. Your very 1900's in thinking when when big bussiness reined. An anything that poor working people attained was communism.
New York did see some evidence of a Republican revolt even though the top of the ticket disgusted many "Republican Voters." Republicans won 6-7 Congressional seats (they currently have only two). If Paladino was not scaring voters away they probably would have won another 4 seats.

While Paldino was the top cause for a poor showing among statewide Republican candidates, a dysfunctional Republican Party failed to provide the basic ingredients for victorious candidacies. Several of the Congressional wins and near wins were cash starved campaigns. National Republican organizations refused to work with the New York State Republican Party.

Mr. Seigal is correctthat Steve Levy would have been a better candidate but his personal baggage would have repelled voters as well. For that matter the weak Rick Lazio would probably have done the least damage.
New York State has become a welfare and public employee entitlement swamp.
As our entrepeneurs and producers continue to run from this socialist quagmire, the prognosis is terribly bleak.
Sooner or later the bottom will drop out and all the public employee unions may start asking themselves 'Just who is John Galt?"
Francis E. Hoefer
Oswego New York
BTW , as this is about to become a war , one thing which needs to be corrected immediately is the vocabulary . " Public Sector "is far too benign a term for the opposition .I would suggest "government " or "state-controlled" union. Perhaps , there are better labels , but it must be remembered that to control the vocabulary is to control a great deal of the debate and its outcome .
Exactly my thinking - both California and New York will have no choice but to ask the federal government to help them fund their enormous deficits - as California expected the feds to do under one projection. There is simply no other way for them to balance their budgets - unless they impose more taxes will mean more businesses leave which means more taxes and on and on and on. There is simply no long term solution for these states other than to rein in spending, which simply isn't going to happen with a Democrat controlled legislature and governor. We see this spiral here in New Jersey where the upper income wealthy and businesses are simply up and moving (80 billion in wealth gone in the last few years), and real estate values are plummeting - which means less taxes and a higher deficit. Fortunately, we have a governor who is at least working on the problem, although he is limited in what he can do by a Democrat controlled legislature. The wild card is the national media, which is headquartered in California and New York and which sees everything through a biased perspective aided by a revolving door with the Democrat party. We can count on the media to immediately run to the assistance of Democrats, and to initiate attacks on the Republican House, and to continue to paint the tea party as a bunch of racist extremists.It will certainly be interesting as one commentator said!
I am reminded of a similar , but mirror image , crisis in the Republic's early days , South Carolina's Nullification Act and the resulting set to of Jackson and Calhoun et al . e ought to anticipate that Obama will discover or fabricate some executive authority that allows the federal government to underwrite this fiscal lunacy . It becomes thus vitally important that the opposition , read Ryan Boehner and McConell, get ahead of the game and reject out of hand any and all federal assistance to these monsters . This will allow the capital markets to calmly unwind their positions in these securities or live with the risk of, or the certainty of ,default .But Obama must not be allowed to initiate the discussion , a preemptive attack is needed right now . Delay could be fatal.
There will be no bailouts forthcoming.

New York and California, and to a lesser degree some other states, will be forced by market discipline to drop ALL their "progressive" programs--for the simplest of reasons.

They are unsustainable.

Nothing simpler than that.

Let 'em sink. Not one drop of welfare from the honest working people in the sane, intelligent parts of the country. Since they insist on this unsustainable course of action, they will have to founder on the rocks of fiscal reality.

When their bond ratings are cut to junk and nobody will lend them a dime, when they've maxed out every credit line available to them, they will either have to cut programs or jack up taxes.

Anybody want to guess which one the geniuses in Sacramento and Albany will choose?

Oh yeah, they'll jack up taxes--and it will have to be BIG TIME if they're to have any hope of maintaining their progressive utopia. Even Steve Jobs will be forced to cough up more than he thinks is fair.

With so many viable firms in New York and California nevertheless riding the razor's edge between profit and loss, a huge swath will be forced by the new taxes to either shut down or move to a state that allows them to survive.

Another huge swath will leave the state even though the new taxes haven't killed them outright--but the wound will be so deep that staying in those states will be unthinkable.

And the Laffer Curve will operate in high gear. With whole industries closing down and leaving, all the businesses that used to serve the multitudes who worked in those industries will enter the extremity caused by the disappearance of their customer base.

So, soon after the departure of the initial industries that can't survive or won't abide the massive tax increases foisted upon them will be the multitudes of small businesses who depended on them for their own survival.

Of course, the vanishing of the California and New York economies will make those increased tax rates insufficient to fund the liberal wonderland, what with the massive increase in transfer payments caused by new arrivals on the unemployment rolls, the vanishing tax base and increasing demand by the influx of illegals who consume more tax dollars than they produce.

Housing will crash as people take bankruptcy just to leave the state and go somewhere they can make a living. California housing prices have always been in la-la land, so this crash will just put those values where they ought to have been all along.

The rich elites have amassed such fortunes over the past fifty years that none of this will really affect them. They will be able to take advantage of the lower home prices to get new places in the more scenic areas where the majority who has to work for a living have left masses of homes unoccupied.

I hate Californians and am ambivalent about New Yorkers. Californians have historically shown a superiority complex that is impossible to abide. To think that nobody in Washington will be picking my pockets to support the unsupportable in California, and that the resulting crash will wreck their Utopian dreams, fills me with unspeakable glee.

It's pretty much all over but the crying as the stimulus is all but spent and California's budgetary problems remain. First thing I want from them is my money back.

Interesting. Yes - the heartland will have to avoid being exploited by the increasingly economically desperate, yet politically powerful states of NY & CA. Something to watch for the next 2 years.
Unfortunately there will be a time when the bill is due. Don't forget about Illinois too, they aren't that far behind.

California and New York are going to have to default because nobody is in a mood to bail them out. If it wrecks the credit rating for the whole country so be it. People from other states cannot be held responsible for those who do not want to be responsible for themselves.

It may be the only way that the spending is stopped when the rest of the states forces them to do so. It doesn't seem that the ballot is working there yet, the voters are denying that there is a problem.
I live in California and we are sickened by the election results. California is being choked out by the unions, their pensions alone are going to bankrupt CA.

This article hit the nail on the head and you are correct, the ignorant liberal mentality in CA is going to effect the rest of the country when we threaten default.

Whitman had a great plan which included temporarily eliminating capital gain tax & payroll tax...this would put money on our pockets and inspire commerce. She did not however campaign on those facts and chose to instead waist her money on negative Brown adds.

We are looking to leave this state and let those who brought us to this place be left to clean it up...sorry everyone. ;0(
Not one penny of bailout money for these insane Progressive blackholes. Let em fail.
I think it's disingenuous to mention Prop 25 in this context. California was the only state in the nation before the election to require a supermajority for both raising taxes and for passing a budget, so it would seem that at least in this situation it should be seen as positive for coming back in line with the other 49 states, none of whom required a supermajority for both of these.

Furthermore, the supermajority requirement didn't mean that the GOP compromised with the Dems -- it just meant that only 5 budgets have been passed on time in the last 30 years because of partisan gridlock. At least * a * budget will get passed this way, instead of the state lingering with none at all.
How will the "interior" states be asked to bail out New York and California? Please explain.